Spitzer Probes
How Music Labels
Get Radio Airplay
By ETHAN SMITH
Staff Reporter of THE WALL STREET JOURNAL
October 22, 2004
The office of New York Attorney General Eliot Spitzer has opened an investigation into the ways global music companies secure radio airplay for their releases, according to people familiar with the matter.
Beginning shortly after Labor Day, the attorney general began requesting documents and information from Warner Music Group; EMI Group PLC; Vivendi Universal SA's Universal Music Group; and Sony Corp. and Bertelsmann AG's Sony BMG Music Entertainment.
Warner Music was served with a subpoena; it is unclear whether the other companies received subpoenas also.
The inquiry concerns the use of so-called independent promoters, middlemen between record companies and radio stations, whom the labels pay -- sometimes handsomely -- to help them secure better airplay for their releases.
This isn't the first time Mr. Spitzer has gone after the global music companies. Over the summer, his office announced a plan to distribute royalty payments the music companies owed to musicians -- some of them very high-profile -- the music companies said they couldn't locate.
People familiar with the matter said they weren't sure how much progress the investigation had made in the nearly two months it has been under way. The inquiry was reported late yesterday by the New York Times' Web site.
Officials from Mr. Spitzer's office couldn't be reached to comment.
The independent-promotion system has long been viewed as a way around laws against payola, which is undisclosed cash payments to individuals in exchange for airplay. If station owners charge money directly for airplay, they must disclose the transaction over the air. The illegal practice of payola resulted in a series of scandals that shook the music and radio worlds in the 1950s and 1960s.
Big radio companies have formalized and to some degree restricted their stations' relationships with independent promoters. Some chains limited the number of promoters they would work with, and some began charging major promoters centralized fees for exclusive "affiliations" with stations. Record labels protested that these arrangements increase their costs and don't often generate more airplay for songs. The amount an independent promoter pays for its relationship with stations ranges from about $20,000 a year in smaller market to as much as $300,000 for a major outlet.
But the practice already has been under attack, and to some degree in retreat. Radio chains always have argued that the use of independent promoters hasn't affected airplay decisions. But last year, the largest radio chain, Clear Channel Communications Inc., said it would end its deals with the promoters to avoid the appearance of a pay-for-play system. Nonetheless, people in the music industry say that, particularly when it comes to rap music, independent promoters are still used regularly, if not as frequently as they once were.
Write to Ethan Smith at
ethan.smith@wsj.com
